Hiring booms in June as economy speeds up

Unemployment drops to 6.1%, lowest since 2008

WASHINGTON (MarketWatch) — The U.S. produced another big batch of jobs in June and the unemployment rate fell to a nearly six-year low as more people entered the labor force and found work, another strong signal that economic growth has accelerated after a dismal first quarter.

The economy created 288,000 jobs last month, posting a fifth straight gain of 200,000 or more, according to the government’s survey of worksites. The last time that happened was in 1999.

The unemployment rate, meanwhile, fell to 6.1% from 6.3%, based on a separate Labor Department survey of Americans households. That’s the lowest jobless rate since September 2008.

The strong jobs report is further evidence the economy continues to build momentum after an surprising rough patch in the first quarter, when U.S. growth contracted by 2.9%. The first-quarter decline marked the steepest drop in growth outside of a recession since 1947, but economists chalk it up to an a particularly harsh winter and other unusual factors that are unlikely to be repeated soon.

“The marked acceleration in the pace of job creation in the second quarter is further evidence that the economy gathered a bit of momentum after a soft entry to the year,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

The rebound in the U.S. economy could force the Federal Reserve to raise interest rates sooner than it had planned unless growth cools off. The central bank has been hoping to keep a key short-term rate at or near zero until mid-2015.

The better-than-expected employment report pushed the Dow Jones industrial average above the 17,000 mark for the first time ever and Treasury yields
US:10_YEARclimbed. Economists surveyed by MarketWatch had expected an increase of 215,000 nonfarm jobs in June.

Inside the jobs report

In June virtually every major industry added jobs, led by professional services, retail, restaurants, health care, finance and manufacturing.

Profession jobs increased by 67,000, just 15% of which were temp positions. Retailers hired 40,000 workers and restaurants added 33,000.

Health-care providers, another source of steady hiring, created 21,000 new positions. Manufacturers took on 16,000 additional workers.

Even the finance industry, which has lagged in hiring since the financial panic in 2008, created 17,000 jobs in June. That’s the largest increase in 27 months.

“Now you are seeing hiring that’s more broad based since the 1990s,” said Richard Moody, chief economist at Regions Financial Corp.

The government said 224,000 new jobs were created in May, up from a preliminary 217,000, based on newly available data. April’s gain was revised up to 304,000 from 282,000, marking the biggest increase in jobs in two and a half years.

So far in 2014 the economy has gained an average of 231,000 jobs a month — 19% faster than last year’s pace of 194,000. The past six months mark one of the best stretches of hiring since the recession ended in mid-2009.

Smooch Reynolds, a senior executive at the executive-recruitment firm DHR International, said she believes the economy may finally be on the verge of a extended period of rapid hiring. Companies are hiring across the board and people looking for new jobs are starting to receive multiple offers.

“Five or six months ago people were just happy to have a job or one job offer,” she said. “What will happen is that competition for talent will re-emerge.”

There were a few blemishes in the jobs report, however. The number of people who had to take on a part-time job for financial reasons jumped by 275,000, offsetting a similarly sized decline in Americans who’ve been without a job six months or longer. And the fewest young adults entered the labor market in June in four years, though that could be the result of a longer school year.

Nor has the rebound in hiring after a winter soft patch nudged wages much higher. Average hourly pay rose 6 cents, or a modest 0.2% to $24.45 in June.

Over the past 12 months hourly pay has climbed a mild 2%, in line with wage trends for the past few years. Wages are rising at just two-thirds the normal rate and higher inflation is eating up most of that gain. The recovery is unlikely to take on a much rosier hue unless workers start to receive bigger inflation-adjusted paychecks, economists say.

“I am surprised we haven’t seen wages rise a bit faster,” Moody said.

The average workweek was unchanged at a postrecession high of 34.5 hours. Hours worked tend to rise when an economy strengthens, but there’s been little change for months.

Whatever the case, the pickup in hiring appears to have drawn more people into the labor force. The participation rate held steady at 62.8% for the third straight month and the number of people who said they were no longer unemployed fell sharply.

The so-called U6 unemployment rate, which includes people who can only find part-time work and those who recently gave up looking, slid to the lowest level since the fall of 2008. The U6 fell a tick to 12.1% from 12.2%.

Separately, the government said weekly U.S. jobless claims edged up by 2,000 to 315,000 in week of June 22 to June 28. Jobless claims, a proxy for layoffs, have been hovering near a postrecession low for several months.

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